Investor Conference Call on August 11,
2022 at 8:00 a.m. ET
TORONTO, Aug. 10,
2022 /CNW/ - Baylin Technologies Inc. (TSX: BYL)
(the "Company" or "Baylin"), a diversified global wireless
technology company focused on research, design, development,
manufacture and sales of passive and active radio
frequency products, satellite communications products, and
supporting services, today announced its financial results for the
three and six months ended June 30, 2022. All amounts
are stated in Canadian dollars unless otherwise indicated.
SECOND QUARTER SUMMARY
- Revenue of $30.1 million in the second quarter of
2022, an increase of $8.5 million or 39.4% compared to the
second quarter of 2021. The increase was primarily due to
stronger sales across all the business lines despite continuing
supply chain disruptions, chipset shortages and the COVID-19
pandemic, which also negatively impacted revenue in the prior year
period.
- Gross profit of $9.0 million
in the second quarter of 2022, an increase of $12.5 million compared to a gross loss of
$3.5 million in the second quarter of
2021. Gross margin was 29.9% in the second quarter of 2022
compared to -16.4% in the second quarter of 2021. Gross margin was
primarily impacted by improved product mix attributable to both
changes in pricing strategy and a data driven focus on contribution
margin at the business line level. The improved gross margin in the
second quarter of 2022 was mainly generated by: (i) stronger gross
margin in the Wireless Infrastructure business line compared to the
second quarter of 2021; (ii) consistent growth in the Embedded
Antenna and Satcom business lines; and, (iii) improvements to the
gross margin earned by the Asia
Pacific business line through operating and financial
efficiencies.
- Adjusted EBITDA(2) of $0.3
million in the second quarter of 2022, the third consecutive
quarter of positive Adjusted EBITDA. Adjusted EBITDA in the
second quarter of 2022 was an increase of $13.0 million compared to negative $12.7 million in the second quarter of 2021. The
increase in Adjusted EBITDA was mainly due to the overall increase
in revenue and gross profit discussed above and a decrease in
operating expenses compared to the prior year period.
- Backlog(4) was $38.9
million at July 31, 2022 and
$37.7 million at June 30, 2022, primarily due to a higher level of
backlog in the Satcom business line compared to the backlog at
December 31, 2021. Backlog at
June 30, 2022 was an increase of
$12.7 million or 51.0% compared to
the backlog at June 30, 2021 as a
result of improved marketing, business development and sales
activities.
- Net loss of $4.3 million in the
second quarter of 2022 compared to a net loss of $33.9 million in the second quarter of 2021. The
net loss in the second quarter of 2022 was primarily due to an
operating loss of $3.2 million,
interest expenses as well as income tax expenses. The net loss in
the second quarter of 2021 included a goodwill impairment charge of
$15.9 million. On a per share basis,
there was a net loss of $0.05 per
share in the second quarter of 2022 compared to a net loss of
$0.64 per share in the second quarter
of 2021.
- Net debt(3) was $21.4
million as at June 30, 2022,
an increase of $9.1 million from
December 31, 2021, mainly due to an
increase in non-cash working capital, capital expenditures and
interest payments.
RECENT DEVELOPMENTS
Product Development
In July 2022, the Company
announced that its Galtronics subsidiary had been selected to
provide embedded antenna solutions for an innovative US Computer
Networking Hardware Company to provide a wireless solution to a
Major US Telecommunications Service Provider. Galtronics was
awarded a multi-year contract and has shipped more than
$0.5 million in product, year to
date. Galtronics will provide the antennas for a 5G mobile hotspot
solution which allows service provider's users to utilize a 5G
internet connection with multi-gigabit speeds at home and on the
move.
In June 2022, the Company
announced that the Satcom business line had received a purchase
order of over $1.5 million for
amplifiers from a major maritime service provider. The amplifiers
will be installed on cruise ships to enable connectivity for
passengers and crew.
Credit Facility
In July 2022, the Company and its
lenders (Royal Bank of Canada and
HSBC Bank Canada) agreed to a further amendment to the Credit
Agreement to reduce the minimum liquidity the Company is required
to maintain from $10 million to
$7.5 million. The Company believes
that this will provide additional flexibility to invest in working
capital and inventory, in particular in order to
actively manage supply chain challenges and long lead times, and to
support deliveries against historically high backlog levels.
MMU Facility
In May 2022, the Company announced
that it would be liquidating the equipment in its massive multiple
input multiple output product ("MMU") facility in Vietnam and applying the proceeds in repayment
of the Vietnam Loan. The Company then retained a firm specializing
in asset liquidations to assist in the liquidation process. During
the past several weeks, the Company and the firm have been
conducting a sales process for the equipment, which is currently
ongoing.
SELECTED FINANCIAL
INFORMATION
The table below discloses selected financial information for the
three and six months ended June 30, 2022 compared to the prior
year period.
(in $000's except
per share amounts)
|
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|
2022
|
|
2021
|
Change
|
Change
|
2022
|
2021
|
Change
|
Change
|
|
$
|
|
$
|
$
|
%
|
$
|
$
|
$
|
%
|
Revenue
|
30,134
|
|
21,622
|
8,512
|
39.4 %
|
61,108
|
45,082
|
16,026
|
35.5 %
|
Gross profit
(loss)
|
9,015
|
|
(3,549)
|
12,564
|
N/A
|
17,071
|
48
|
17,023
|
> 100.0%
|
Loss before income
taxes
|
(4,071)
|
|
(33,981)
|
29,910
|
(88.0 %)
|
(7,948)
|
(42,425)
|
34,477
|
(81.3 %)
|
Income tax expense
(recovery)
|
237
|
|
(46)
|
283
|
N/A
|
(567)
|
(28)
|
(539)
|
> 100.0%
|
Net loss
|
(4,308)
|
|
(33,935)
|
29,627
|
(87.3 %)
|
(7,381)
|
(42,397)
|
35,016
|
(82.6 %)
|
Basic and diluted net
loss per share
|
($0.05)
|
|
($0.64)
|
$0.59
|
(92.2 %)
|
($0.09)
|
($0.83)
|
$0.74
|
(89.2 %)
|
EBITDA(1)
|
(546)
|
|
(29,887)
|
29,341
|
(98.2 %)
|
(792)
|
(32,603)
|
31,811
|
(97.6 %)
|
Adjusted
EBITDA(2)
|
323
|
|
(12,721)
|
13,044
|
N/A
|
547
|
(14,978)
|
15,525
|
N/A
|
Current
assets
|
54,344
|
|
48,087
|
6,257
|
13.0 %
|
54,344
|
48,087
|
6,257
|
13.0 %
|
Total assets
|
81,751
|
|
102,127
|
(20,376)
|
(20.0 %)
|
81,751
|
102,127
|
(20,376)
|
(20.0 %)
|
Current
liabilities
|
59,395
|
|
57,794
|
1,601
|
2.8 %
|
59,395
|
57,794
|
1,601
|
2.8 %
|
Non-current
liabilities
|
17,505
|
|
22,544
|
(5,039)
|
(22.4 %)
|
17,505
|
22,544
|
(5,039)
|
(22.4 %)
|
Total
liabilities
|
76,900
|
|
80,338
|
(3,438)
|
(4.3 %)
|
76,900
|
80,338
|
(3,438)
|
(4.3 %)
|
Net
debt(3)
|
21,354
|
|
24,437
|
(3,083)
|
(12.6 %)
|
21,354
|
24,437
|
(3,083)
|
(12.6 %)
|
Backlog(4)
|
37,702
|
|
24,961
|
12,741
|
51.0 %
|
37,702
|
24,961
|
12,741
|
51.0 %
|
(1)
|
See "Non-IFRS
Measures". EBITDA refers to operating income (loss) plus
depreciation and amortization.
|
(2)
|
See "Non-IFRS
Measures". Adjusted EBITDA refers to EBITDA plus the sum of: a)
acquisition expenses; b) fair value step-up of inventory acquired
as part of an acquisition; c) expenses for litigation relating to
acquisition agreements; d) expenses relating to planned
restructuring following an acquisition; e) impairment of fixed and
intangible assets (including goodwill) following an acquisition; f)
expenses to permanently close or relocate a facility, shut down a
line of business, eliminate positions; g) expenses related to
corporate re-organization; and, h) non-cash
compensation.
|
(3)
|
See "Non-IFRS
Measures". Net debt refers to total bank indebtedness less cash and
cash equivalents.
|
(4)
|
See "Non-IFRS
Measures". Backlog refers to the value of unfulfilled purchase
orders placed by customers.
|
A copy of the Company's unaudited interim condensed consolidated
financial statements for the three and six months ended
June 30, 2022 and corresponding management's discussion and
analysis (the "MD&A") are available under the Company's SEDAR
profile on www.sedar.com.
OUTLOOK
The Company's financial performance continued to improve, with a
third consecutive quarter of positive Adjusted EBITDA, and improved
gross margins in the second quarter of 2022 compared to the prior
year period. Nevertheless, challenges exacerbated by the COVID-19
pandemic persist: in particular, material shortages and increased
material costs due to supply chain disruptions are causing delays
in both the production and the delivery of our products and are
causing push-outs of orders from our customers. We had expected
that these disruptions would begin to ease over the second half of
2022, but now anticipate that they are likely to continue into the
fourth quarter of the year. The ongoing war in Ukraine and the risk of additional
COVID-related lockdowns in China
could continue to exacerbate the supply chain disruption.
Despite these continuing challenges, we
expect that
the second half of 2022 will be
similar in both revenue and Adjusted EBITDA to the first half
of 2022.
Asia Pacific Business Line
Revenue in the second quarter of 2022 was adversely affected by
across-the-board production volume reductions at Asia Pacific's largest customer, due in part
to worsening economic conditions and expected softening in consumer
spending. Management of the Asia
Pacific business line was able to limit the effect of lower
revenue by proactively managing operating costs. We are continuing
to conduct reviews of Asia
Pacific's product portfolio to improve its product mix. The
objective of these reviews is to improve the contribution margin of
this business line, even if it means foregoing additional
revenue. We expect revenue and Adjusted EBITDA for the second
half of 2022 to be comparable to the first half of the year.
Embedded Antenna Business Line
The Embedded Antenna business line continued to show
considerable strength in the second quarter of 2022, with growth in
both revenue and volumes, due in part to demand from new customers
for home networking products, as well as stronger Adjusted EBITDA
and improved gross margins. This continues the improvement in
financial performance of the Embedded Antenna business line over
the past 12 months, despite intermittent COVID-19 lockdowns in
China and global chipset shortages
which have impacted customers' build schedules and forecasts. We
do, however, expect the second half of 2022 to be modestly lower in
volumes, albeit with continuing profitability.
Wireless Infrastructure Business Line
The Wireless Infrastructure business line had a strong second
quarter, with growth in both revenue and gross margins. We expect
that DAS deployments will strengthen, particularly for use in
stadiums and in building wireless throughout 2022. New multibeam
BSAs and new innovative small cell antennas from Galtronics will
come to market in the second half of 2022, opening new
opportunities to drive sales with wireless carriers. We expect the
third quarter of 2022 to be lower in revenue than the second
quarter, with the fourth quarter returning to normal levels.
Satcom Business Line
The commercial side of the Satcom business line continues to
demonstrate consistent demand with capital spending by our
customers continuing the momentum seen in the first quarter of
2022. Given the capital build cycles of Satellite operators and
others in the Satcom ecosystem, we continue to expect the benefit
to the Satcom business line for the remainder of the year.
Sales for military and other government-related uses, which
represents the balance of Satcom business line, will continue and
potentially increase in late 2022, as many western countries have
dramatically increased their defense spendings. Moreover, we expect
to launch multiple technology upgrades within our product portfolio
by the fourth quarter of 2022.
Overall, we expect revenue and Adjusted EBITDA of the Satcom
business line to be consistent in the second half of 2022 compared
with the first half of the year. The Satcom business line continues
to demonstrate a strong order book but continues to face supply
chain constraints, chipset shortages and component delays. We are
taking steps to improve production efficiencies in our facilities
in order to address the backlog and improve overall revenue
attainment.
INVESTOR CONFERENCE CALL
Baylin will hold a conference call on August 11, 2022 at 8:00
a.m. (ET) to discuss its financial results for the three and
six months ended June 30, 2022. The call will be hosted by
Leighton Carroll, Chief Executive
Officer, Dan Nohdomi, Chief
Financial Officer, and Daniel Kim,
Executive Vice President of Corporate Development. All interested
parties are invited to participate using the dial-in details
provided below.
Date:
August 11, 2022
Time:
8:00 a.m. (ET)
Dial-in Number:
888-664-6392 or 416-764-8659
Conference ID#:
31684593
Webcast:
https://app.webinar.net/2ol8NrpBrxA
FORWARD-LOOKING INFORMATION AND
STATEMENTS
This press release includes forward-looking information and
forward-looking statements (together, "forward-looking statements")
within the meaning of applicable securities laws.
Forward-looking statements are not statements of historical
fact. Rather, forward-looking statements are disclosure
regarding conditions, developments, events or financial performance
that we expect or anticipate may or will occur in the future
including, among other things, information or statements concerning
our objectives and strategies to achieve those objectives,
statements with respect to management's beliefs, estimates,
intentions and plans, and statements concerning anticipated future
circumstances, events, expectations, operations, performance or
results. Forward-looking statements can be identified generally by
the use of forward-looking terminology, such as "anticipate",
"believe", "could", "should", "would", "estimate", "expect",
"forecast", "indicate", "intend", "likely", "may", "outlook",
"plan", "potential", "project", "seek", "target", "trend" or "will"
or the negative or other variations of these words or other
comparable words or phrases and is intended to identify
forward-looking statements, although not all forward-looking
statements contain these words.
The forward-looking statements in this press release include
statements concerning the continuing effect of the COVID-19
pandemic on our business, the outlook for our business lines,
including the effect of supply chain and other disruptions and the
growth in our backlog, the refinancing of our credit facilities and
the closure of our MMU facility in Vietnam. Forward-looking information and
statements are based on certain assumptions and estimates made by
us in light of the experience and perception of historical trends,
current conditions, expected future developments, including
projected growth in sales of passive and active radio frequency and
satellite communications products, and supporting services, and
other factors we believe are appropriate and reasonable in the
circumstances, but there can be no assurance that such assumptions
and estimates will prove to be correct.
Many factors could cause our actual results, level of activity,
performance or achievements or future events or developments to
differ materially from those expressed or implied by the
forward-looking statements, including the risk factors discussed in
the Company's most recent Annual Information Form, which is
available under the Company's profile on SEDAR at www.sedar.com.
All the forward-looking statements made in this press release are
qualified by these cautionary statements and other cautionary
statements or factors in this press release. There can be no
assurance that the actual results or developments will be realized
or, even if substantially realized, will have the expected
consequences to, or effects on, the Company. Unless required by
applicable securities law, the Company does not intend and does not
assume any obligation to update any forward-looking statements.
NON-IFRS MEASURES
This press release includes a number of measures that are not
prescribed by International Financial Reporting Standards ("IFRS")
and as such may not be comparable to similar measures presented by
other companies. We believe these measures are commonly employed to
measure performance in our industry and are used by analysts,
investors, lenders and interested parties to evaluate financial
performance and our ability to incur and service debt to support
business activities. While management of the Company believes that
non-IFRS measures provide helpful supplemental information, they
should not be considered in isolation as an alternative to net
income, cash flows generated by operating, investing or financing
activities, or other financial statement data presented in
accordance with IFRS. See "Non-IFRS Measures" on page 2 of the
MD&A for further information.
ABOUT BAYLIN
Baylin Technologies Inc. is a diversified global wireless
technology company. Baylin focuses on the research, design,
development, manufacture and sales of passive and active radio
frequency products, satellite communications products, and
supporting services.
SOURCE Baylin Technologies Inc.